Editor’s Corner—The problem with state-led healthcare policy

It's currently in vogue to push for states to take the reins on healthcare policy, but history shows that hasn't always worked out well.

Leslie Small

Ever since Republicans took control of Congress and the White House, there has been a lot of talk about the virtue of letting states—not the federal government—control healthcare policy.

It’s a shrewd talking point, because on the surface it seems universally attractive. Republicans, of course, have long championed the concept of states’ rights, and even people from the bluest of states sometimes resent the intrusion of federal mandates.

In recent months, the give-states-more-control concept has popped up all over the place:

Last week, the Centers for Medicare & Medicaid Services announced that it plans to allow both small businesses and consumers who shop for plans on third-party websites to bypass the federal health insurance exchange, Healthcare.gov. As CMS Administrator Seema Verma put it: “It is time to get the federal government out of the way and give patients the best tools to make their own healthcare decisions.”

CMS also issued a set of guidelines to help states seek waivers to exempt them from certain Affordable Care Act requirements, with the specific goal of establishing high-risk pools or state-operated reinsurance programs.

In a letter sent to governors in March, federal health officials also encouraged states to use waivers to experiment with their Medicaid programs, saying the current application of federal rules is “rigid and outdated.”

The version of the American Health Care Act that passed the House includes a controversial amendment that would let states opt out of the ACA’s essential health benefits requirements and the “community rating” rule, which prevents insurers from charging higher premiums for high-risk individual market customers.

An alternative ACA repeal plan floated by moderate GOP senators Susan Collins and Bill Cassidy essentially would let states keep the ACA’s core structures in place if they choose.

Even President Donald Trump—he of limited healthcare policy knowledge—worked the idea into a recent interview with The Economist, saying: “I would like to see states taking over healthcare, I think they could do a better job than the federal government.”

So, suffice to say, federalist fervor is alive and well in the corridors of power.

Certainly, there are instances where states can, and should, take matters into their own hands. Take Alaska, which did a fine job of at least temporarily rescuing its individual market from collapse, leading the Trump administration to hold it up as a shining example of state-based innovation.

But here’s the thing: contrary to characterizations of the ACA as an example of extreme government overreach, the law already gives states plenty of leeway to shape healthcare policy for their citizens.

They could choose to use Healthcare.gov or set up their own exchange. They had access to federal funding to test state-based models for healthcare delivery transformation. And thanks to an unfortunate Supreme Court decision, they were even allowed to choose whether they wanted to accept free federal money to expand Medicaid eligibility.

Some states actually did turn down that funding, and the consequences have offered an eye-opening example of what can happen when states are given the “flexibility” to choose ideology over sound public policy.

Study after study has chronicled how well expansion states fared compared to their counterparts. They saw greater declines in the number of uninsured low-income adults; their hospitals grappled with less uncompensated care; and even their economies were better off.

Interestingly, a study out this week suggested that some state flexibility can pay off—but there are limits. It found that Arkansas and Kentucky's low-income citizens enjoyed similar gains in areas like insurance coverage rates and self-reported health status, even though Arkansas used a state waiver to expand Medicaid eligibility rather than the standard route Kentucky took. But the study also found that Texas, which stubbornly refused to expand Medicaid, did not enjoy those same gains.

For a non-Medicaid example, take a look at how states’ individual markets handled individuals with pre-existing conditions before the ACA. Their approaches to ensuring these individuals had affordable coverage were all over the map.

Pennsylvania, for example, tried to solve the problem by creating a scaled-back health plan for the uninsured with incomes too high to qualify for Medicaid, but the project proved too costly. Other states turned to high-risk pools—Maine even beat the odds with a successful, well-funded “invisible” high-risk pool—but most faced a variety of challenges that limited their effectiveness.

The key word there is “variety,” because for the most part, variation is exactly what you get when you let states implement a patchwork of regulations. In medicine, there’s a growing movement to excise variation in care and replace it with safer, evidence-based best practices. Some call it “cookbook medicine,” but others simply call it common sense.

Some things are simply too important not to require that they are done correctly and consistently. Ensuring that all individuals have access to affordable healthcare, while still giving states a reasonable amount of flexibility, is one of them. Certainly, the ACA left a lot to be desired in its endeavor to make this a reality, but the answer is not to turn back the clock to an unequal, totally decentralized approach.

Doing so doesn’t give anyone more freedom—it simply institutionalizes inequality. And in a country where the divide between haves and have-nots is already dangerously wide, that is a policy we can ill afford.